Project Will Include Costs for Pipeline and Production Facilities

The $16 billion cost estimate for the Canadian pipeline project is not money needed strictly for construction of a pipeline. Larry Persily, the Federal Coordinator for Alaska Natural Gas Transportation Projects, says about half that amount will be used to develop the gas production facilities to have a product to ship in the line.

“A little more than $8 billion of that estimate is to build an oil and gas field up in the Mackenzie,” Persily says. “So that puts it at a significant cost disadvantage. Alaska has those facilities built on the North Slope. They’ve been working for years. They’re going to have to build them from scratch in MacKenzie – and that makes it a tougher project economically.”

He says there has been exploration of the field, but including the costs of actually drilling for it, he says the project is offering less gas for more money. Persily says the regulatory approval is good news for the proponents of MacKenzie. However, Alaska’s project is not threatened. He says that even if MacKenzie gets full government approval, the Canadians will have to take the same final steps as Alaska’s line – both will need investors and shippers. He says both US and Canadian developers are moving in parallel – doing the same thing.

“They’re looking at the commercial terms, “ he says. “They’re looking at the economic viability. The MacKenzie project sponsors have asked the Canadian government for financial assistance in paying for the infrastructure. The Aboriginal Pipeline Group which represents First Nations in Canada has the option of taking a stake in the project. They, too, have asked the Canadian government for financial help to help bankroll that stake in it. The MacKenzie project needs money just like the Alaska project. “

Persily’s office has scheduled a public forum on natural gas markets to be held in Anchorage January 22 with participation by representatives of public and private sector organization.